Penske (PAG) Gains from Buyouts, Wide Dealership Network

On Feb 12, we issued an updated research report on the automotive and commercial truck dealership company, Penske Automotive Group, Inc.PAG.

In the fourth-quarter 2017, Penske Automotive witnessed a year-over-year increase in revenues and adjusted earnings. Moreover, both earnings and revenues surpassed the respective Zacks Consensus Estimate.

In January, the company completed acquiring The Car People, a used-vehicle seller based in the United Kingdom, which is expected to generate annualized revenues of roughly $300 million. Earlier in February 2017, Penske Automotive bought another used-vehicles retailer, CarShop.

These acquisitions will enable the company to develop its used-car business segment and reinforce its position in the United Kingdom, the company’s second-largest market. In fiscal 2017, its U.K. market contributed 33% in the total revenue, in comparison to 32% in the year-ago period.

Additionally, its expanding dealership network is boosting earnings. As of Dec 31, 2017, the company had operated 20 medium and heavy-duty truck dealership locations in the United States and Canada, having retailed 2,294 units and generated $308.2 million of revenues.

Also, in order to boost shareholder confidence in Penske Automotive, its management frequently engages in share repurchase programs and hikes its cash dividend payments. In 2017, the company repurchased 302,000 shares for $12.7 million. Further, in January, it hiked its dividend 3% to 34 cents for fourth-quarter fiscal 2017, which is to be paid on Mar 1, 2018. In fact, the company increased its quarterly cash dividends in each of the trailing four quarters from its preceding payouts.

Penske Automotive’s stock has seen the Zacks Consensus Estimate for quarterly earnings being revised 2.7% upward over the last seven days.

Price Performance

Penske Automotive’s stock has surged 5.8% in the last three months, substantially outperforming the 2% rally of the industry it belongs to.

PACCAR has an expected long-term growth rate of 10%. In the last six months, shares of the company have gained 4.7%.

Genuine Parts has an expected long-term growth rate of 7.2%. Shares of the company have rallied 16.7% in the last six months.

Lear Corp. has an expected long-term growth rate of 7.1%. In the last six months, shares of the company have jumped 30.8%.

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